What is a Ginnie Mae security?

By Investopedia Staff AAA
A:

A Ginnie Mae, or Government National Mortgage Association security, functions similarly to the process of lending someone money to purchase a house or business. Ginnie Mae buys home mortgages from banks and financial institutions, bundles them together, and then markets portions of these bundles to investors.

For example, if you invest $100,000 in a Ginnie Mae, you are essentially lending someone money to buy a house or business with the help and the guarantee of a government organization. You would receive monthly payments consisting of interest on the loan and perhaps also a portion of the principal. These are similar to the payments a bank receives when it lends money to a home or business buyer. If it isn't included in the monthly payment, the principal is paid back at the end of a specified time period.

Ginnie Maes are the most popular type of mortgage backed securities because they are guaranteed by the U.S. government. They are not impervious to risk, but the government will step in to prevent the collapse of Ginnie Mae and its securities.

To learn more, see Profit From Mortgage Debt With MBS.

RELATED FAQS

  1. What are the main categories of debt?

    Learn about the different types of debt available for consumers including secured debt, unsecured debt, revolving debt and ...
  2. Does every inquiry affect a credit score?

    Check a credit report to prevent an overabundance of hard inquiries and to obtain an overall picture of your credit score's ...
  3. What's the difference between a secured line of credit and an unsecured line of credit?

    Discover the differences between a secured line of credit and an unsecured line of credit, and why lenders treat the two ...
  4. How does refinancing my mortgage affect my FICO score?

    Learn some of the ways refinancing your mortgage could impact your FICO credit score, especially if you have held your current ...
RELATED TERMS
  1. Forbearance

    A temporary postponement of mortgage payments.
  2. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes ...
  3. USDA Non-Streamlined Refinancing

    A mortgage-refinancing option offered by the United States Department ...
  4. No-Appraisal Mortgage

    A type of home loan used for refinancing for which the lender ...
  5. No-Appraisal Refinancing

    A type of mortgage for which the lender does not require an independent, ...
  6. No-Appraisal Loan

    A mortgage that does not require an appraisal of the property’s ...
Related Articles
  1. How Our Borrowing Habits Have Changed ...
    Credit & Loans

    How Our Borrowing Habits Have Changed ...

  2. Buying A Home: Cash Vs. Mortgage
    Credit & Loans

    Buying A Home: Cash Vs. Mortgage

  3. The 4 Worst Reasons For A Cash Advance
    Credit & Loans

    The 4 Worst Reasons For A Cash Advance

  4. Steps To Buy A Home
    Home & Auto

    Steps To Buy A Home

  5. How Does A Reverse Mortgage Work?
    Retirement

    How Does A Reverse Mortgage Work?

Trading Center